Accounting and Finance Foundations

Unit 7

Accounting and Finance Foundations Unit 7: Financial Statements 587

Financial Statements

Chapter 18

Student Guide

Relationship Among Financial Statements 2.3.9Lesson 18.5 (cont’d)

Income Statement

Revenue $37,436

• Expenses 34,136
  Net Income $3,300

Statement of Owner’s Equity

Beginning Owner’s

Equity $6,805

+ Net Income 3,300

• Owner’s Drawings (1,000)
  Ending Owner’s Equity $9,105

Statement of Cash Flows

+/- Cash Flows from Operating Activities $1,069

+/- Cash Flows from Investing Activities (1,625)

+/- Cash Flows from Financing Activities 400

Changes in Cash (156)

+ Cash at the beginning of the period 5,051

Cash at the end of the period $4,895

Balance Sheet

Cash $4,895

Other Assets 20,266

Total Assets $25,261

Liabilities $16,156

Owner’s Capital 9,105

Total Liabilities and Owner’s Equity $25,261

Look on the income statement above. Net income is $3,300. To complete a statement of owner’s equity, you

must have the net income. Once the ending owner’s equity is determined, that number is used to represent

owner’s capital on the balance sheet. The cash on the balance sheet is determined from the final cash on

hand figure from the statement of cash flows.

Think about financial statements as being one big jigsaw puzzle; if one piece is missing, you don’t have a

complete project/puzzle.

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